On March 31, 2018, Chow Brothers, Inc., bought 10% of KT Manufacturing's capital stock for $50 million. KT's net income for the year ended December 31, 2018, was $80 million. The fair value of the shares held by Chow was $35 million at December 31, 2018. KT did not declare or pay a dividend during 2018.

Required:

1.Complete the appropriate journal entries related to the investment during 2018.

2.Assume that Chow sold the stock on January 20, 2019 for #30 million. Prepare the journal entry Sanborn would use to record the sale.

Transactions needed:

1)Record the purchase of KT Manufacturing's capital stock for $50 million.

2)Record the entry for KT's net income.

3)Record the fair value adjustment.

4)Record the sale of stock on January 20, 2019 for $30 million.

Please add explanations with your answers.